What you should know when it comes to redundancy

A difficult conversation

When running a business, it’s unlikely you’ll have to do anything more difficult than making employees redundant. Telling somebody that they no longer have a job, particularly if they are not at fault, can be very challenging, but it’s a scenario many business owners will encounter at one time or another.

The process

Keeping costs down

Redundancy is usually the last resort, why not take a look at our keeping costs down guide to hopefully prevent redundancy in the future.

What you need to know

The first thing to note is that all employees have rights. You cannot use redundancy as a way of getting rid of somebody you don’t like, simply because you don’t like them. You must be able to justify your reasons for deciding that they are the person that will be affected by the cuts.

You must attempt to find the employee concerned another role within the organisation. However, if there is no suitable position available, you can continue with the redundancy process. Redundancy can be compulsory or non-compulsory.

Redundancy is only something that is usually only considered if all other options have been exhausted. There are a number of situations that can result in the need for staff redundancies, such as the installation of a new technology that can do the role of an individual, a fall in company profits, or a revision of roles that are required to help the business move forward.

You should understand the steps to take once you've decided that one of your employees will have to lose their job, because it is an incredibly serious matter that takes time, and must be handled in the correct way.

There are two main types of non-compulsory redundancy - voluntary, and early retirement. In the case of voluntary redundancy, an employee can nominate themselves. With early retirement, the scenario is very much the same, but the employee will then subsequently retire. You cannot, however, force anyone into making either of these decisions – only the employee can decide that they wish to choose one of these options.

If you, as the business owner, have decided that you need to make redundancies, you must identify the employee/s that will lose their jobs – ensuring that the entire process is completely fair and above board – and then inform them of the decision. You will then have to inform them of their notice period, and all of the details that accompany the decision.

Consulting employees

Ensuring that all affected employees understand the process, and are made fully aware of the circumstances that have resulted in them having to be made unemployed, is very important. If you fail to consult employees, you could be taken to an employment tribunal further down the line.

If fewer than 20 employees are to be let go, there are no set rules to follow, but it is generally considered good practice to consult employees, give them adequate time to digest the news, and begin the process of looking for a new position elsewhere.

If 20 or more employees are to be made redundant, then you must follow collective consultation rules, the exact details can be found on the gov.uk website.

Giving staff notice

Giving staff notice is an important part of the redundancy procedure - you need to given them enough time to come to terms with the decision and to look for another job.

If an employee has been working with you for between one month and two years, then you will need to give them at least one week's notice

If they have been employed for between two years and 12 years, then you should give one week for every year they have been an employee (so someone that has been with you for eight years will need eight weeks’ notice, for example)

If they have worked for the company for 12 or more years, then they will require a notice period of 12 weeks.

It is worth noting that these periods are just the minimum legal requirement – you can give longer should you prefer.

Redundancy pay

If an employee has a contract, they may be entitled to some kind of payment. Working out how much an employee is owed is very important. If you don't give them the agreed sum, or if you fail to pay within six months, the employee could take you to a tribunal. You can use this calculator to see how much each employee is likely to be due.